the boston terrorist attack continues next with neil cavuto. ♪ an update on the sperm tax. [laughter] >> the clock is ticking. taxes are due but most americans now pay someone else to do that because the rules are so complex. >> i have an accountant. >> you don't want to do it yourself. >> i have no idea and i promise this is true. >> he does my taxes. i don't want to pay him but i have to because i understand the rules. i bet you don't either. tonight we will test to. >> one state offers a $50 tax credit for losing both arms.

>> that shows how crazy the irs took your money to make the film that without them the earth would be in chaos. >> money laundering, bribery >> some people want higher taxes, but we are already taxed to death. that is our show. tonight. john: justice oliver wendell holmes once said taxes are what we pay for a civilized society. liberals like to cite that but he said that in 1927 when taxes were just 10 percent of gdp. that is enough to pay for a civilized society but government has grown so far far, so fast it is now spending 40 percent of gdp.

is too big but i do want to to pay my fair share. what is fair? i now give most of my income to the government. pork people pay a smaller percentage of those say that's fair. budget congressmen louie gohmert says it is not fair and that means what? >> whe people hear the word fair share it should be a flat tax the only way to truly make things fair so that if you make more you pay more make it a flat tax the president -- president has talked repeatedly about warren buffett not payng their rate as the secretary. fix it. make capital gains 15 or the income tax 15.

we can work out a number but make it flat to make it fair you hear people say i want it fair but they cannot tell you what the fair share is. you give them the numbers of the top 1 percent making 13 percent of the many that paying 39% of the taxes the eyes crossover but is it fair with everybody paid the same rate across the board? they say yes. i think americans are ready. john: i am skeptical providing most would say warren buffett has billions of dollars, he should pay more than i do. >> that is absolutely right to. he should pay more. john: i need a higher percentage. >> that would be progressive and that plays into people's jealousy. i don't want to go after millionaire's more than anyone else. we need a flat tax.

people don't mind if you would see they don't have all the deductions and wiggle room and would be in the same position as everyone else. john: when you talk about the flat tax you talk about getting rid of deductions and just keep charity and mortgage interest deduction. >> everything else is gone. if you would design a system that would allow maximum corruption, maximum lobbying efforts and fund-raising in washington you created a system just like we have for it is so complex, we have got to fix it. it cannot keepgoing like this. >> that the complication is with the stupid deductions and exceptions of gradted progressive tax rate is not that complicated. >> the way the wealthy have not been fighting so hard against the progressive

right is they have the loopholes and the wealthiest will stop fighting so hard if they have the sameevel playing field as everyone else and people would except that the leadership has not been willing to push it and i think it is a no-brainer we should push it. johnthank you congressman t. levin steve forbes and are laugher and those who have pushed from before me. john: we will hear from him later. what i hate even more is the complication. i resent i have to pay bob for the hours he spends doing my tax forms. but i have to because there is no way i could do mine on my own. the federal tax code is 70,000 pages long. 70,000 pages. this is just what the fed does and state and local does more. they all have some purpose to penalize behavior coming anchorage and other but the

results is insanity that helps the politically connected. people in the know like me. the tax rules once gave me a free tax -- golf cart because john -- charlie rangel said it was a good thing. >> energy efficient cars such as plugging in a car. >> they could advertise free cars. >> for $6,000 get a $6,000 tax credit. got this totally free. >> but the taxpayers paid for its. >> and i gave it away. and that credit no longer exists but things like that keep the tax code complicated this is just the income tax. there are sneaky taxes that most of you may not even know about that. >> we pay them all day long

from the moment i wake up and turn on the light. i pay more when i brush my teeth, license my dog, my building pays property taxes and when they leave home to take the subway i paid the metropolitan commuter one negative commuter tax. i make phone calls or get a bite to eat, soda and drink drink, when a gas up my car as much as one-quarter of the price is the state and city excise taxes. people pay sales taxes all day long. so many taxes. i need a drink. i am lucky i don't smoke. this is one reason american economic growth has stalled says scott hodge predent of the tax foundation. when i think of these rules i think of safety regulations and the constant

spiderweb not the tax code. we have done okay with the tax code. >> the tax code is a mess because of the 70,000 pages that dictate virtually every aspect of our lives and cost americans 6 billion hours of our time just toomply. six out of 10 of us pay someone else because not only so complicated we are afraid to make a mistakeo get dited. it has created fear as well as complexity. john: so those six out of 10 could have used that money and time to boost the economy to do something useful? >> it is called deadweight loss. it cost $200 billion per year just to comply with the 70,000 pages of tax regulations that is why the economy grows so slowly. john: they are popular. steering people to good things, solar panels on the

roof of your house to get a credit if you adopt a child child, congress passes these things because people say that is fair. >> they sound great by themselves but if you put them together it creates a complicated mess to dictate every aspect of our lives and made the irs with the super agency where we put our kids in day care to a hybrid vehicle. john: why is it nuts if you want people to put kids in day care that need the help or to buy a hybrid vehicle how else do you steer them there? >> is years the economy in the wrong direction why the economy grows so slowly because we dictator lives to the tax stem not what is economically efficient or profitable. that is what drives the economy and with other countries have done to streamline their tax system like hongkong.

15 countriescross the globe have moved to the flat tax. hong kong has so low rate, a broad base no negative tax or capital gai or other taxes that create the economic inefficiency. john: to be clear they don't have a flat tax but it is a simple tax. russia, estonia have 15 or 20 percent flat tax. >> exactly. john: hong kong women from poor to rich in a few years. they grew out of poverty because of simple rules. >> that made them one of the most business friendly economically efficient countries on the globe. john: the tax foundation says we haveo deductions? >> there are a few there are somelike having a deduction for savings we should not tax back or capital gains but get rid of the

politically directed. john: charity? >> the tax the nation is a charity under the tax code but i would give that up for the flat tax. john: billing to give up money for the flat tax to do know the irs used your tax dollars to produce a "star trek" parity? >> it has resulted in a widespread case of confusion >> the secret tax is a obamacare and people who profit from the complex tax code. >> the affordable care act means big changes this year when you file your taxes. i read the whole 900 pages.

john: i understand i have to pay taxes but i resent this sneaky taxes, a hidden fees on my phone bill and electric bill now we will hit by news sneaky taxes as part of obamacare. may be thought that was funded by drug companies but you will pay more although there has not been much publicity says john merline

writing for investors business daily. what is hidden? >> 21 separate tax hikes. most of then you won't see they are headed in various ways. but if you have a flexible spending accot which millions of americans do tax-free money you can spend on health care also called coal savings a medical savings account obamacare limit set at $2,500 to anybody who was putting $5,000 into flexible spending wl pay more taxes next year but they won't know why but then realized they have a smaller deduction. they also have limits on what you can use that the flexible spending account on. obamacare says you can spend on over-the-counter drugs but you used to be able to. the limit how much you can play in raises $24 billion

over 10 years but the limit raises another 4 billion so it is not peuts it is real money. john: the biggest $317 billion payroll and investment tax? image that supposedly is the tax hike on the wealthy. if you make over $250,000 your medicare tax you pay a premium zero point* 9%. it goes up by almost 1% then there is a tax on investment of three point* 8%. john: obamacare it has the high medical bill tax? >> right now you can dedt medical expenses if they are over seven point* 5% of your income but obamacare raises the threshold that 10 percent so you are sick with high medical bills next year you cannot deduct nearly as much money. john: and the mandate

penalties that says i will not insure my people i will just pay the pnalty. >> it is the tax. >> the supreme court says it is a tax. the penalty tax will rais about $50 billion over 10 years and penalties paid by businesses who don't buy insurance. you have to or pay the penalty. john: we just cover four or five out of 20. it is so complex h&r block made a commercial to capitalize on the complications of obamacare. >> be affordable ce act means big changes when you file your taxes. i read the whole 900 pages. will give you a tax and health care review. i know the law. i have the solutions and can help you figure it out. john: she is smiling. a big grin. i invited h&r block to talk

about the gating but they did not respond. they are happy because complexity we have to pay them. >> this turbochargers tax complexity. you have to figure h much subsidy you are due in did you don't buy insurance homa of a penalty you pay. that is really complicated if you have an insurance gap of three months or less you don't but if it is more you do. if it is an exempt category you don't have to do either. it is so complicated that the application form is 21 pages long because they need to know how much income. john: i hate it. most americans have to go to someone they do not do the taxes on their own. thank you.

john merline from "investors business daily." a new version of star trek? paid for by the irs, bayou. you will not believe what they do with your money. >> with the planned attacks according to the leaders they have created an arkie chaos roll over order.

john: as i pay my taxes it would be comforting to know that the people understand the burden taxes impose as they approach work with humility but this training video that they paid for with the takeoff on "star trek". >> captain's log start 8823 point* 2010 we received a distress call the private

civilization has anarchy, chaos ruled over order. john: the training video they say without the i.r.a. civilization ends and chaos begins. >> it is worse than we thought moneyaundering, bribery running rampant in the street and cash paid manars industry. >> what is wrong with paying cash? apparently that is destructive chaos. and they are upset that on that planet in mitscher's help people with taxes. >> they're all calling and. >> there practicing without a license we asked one for his credentials and he showed a movie ticket stub. >> which movie? >> "avatar" 17. i dreamed i would be rich and famous spirit that is why i became a public servant.

john: that cost $60,000. why would the irs do this? kennedy and matt welch have ideas. what is going on? >> this is a conference of irs investigators so it is no way to build morale to feel good about themselves to feel good that they go throughout the galaxy to make sure that there is no chaos because there are irs tax collectors scrounging through each seat cushion. >> it is distrustful of human nature and it is a logical and the acting is horrible. i am offended. john: it is logical we need some taxes to pay for the government. >> no logic some know if you take the irs out of the american picture that it will devolve into anarchy. >> we did not have federal income-tax is 100 years ago.

the notion and the united states back then was the biggest economy in the world. not chaos or anarchy but the world's most successful economy before the federal income-tax. john: that government got ny from user fees, tariffs and the last clip says amateurs were helping people with taxes. the government tried to get a law passed saying you had to have a license to give tax help but they lost the match with the help of our good friends at h&r block that i spent 40 hours there last saturday the complity is everybody's friend but the consumer. it is great for h&r bloc and certified taxpayers but bad for dividual spinet they make a joke about it how complex the tax code is and how many forms you need. the joke is on us at our

expense the fact it is such a complicated system why not wn to one forms of people can file taxes themselves and don't have to have professional help? john: they want deductions in uniform. >> that hurts the poor people. john: that is congress's fault. not the i.r.a. >> one more. >> the recent exchange of the lowest currency for par bills. pennies on the dollar. john: this is funny to the irs. >> it is an inside joke that is what you get him lawsuits with back taxes ultimately they are collected at pennies on the dollar instead the fullback tax bill that they find uniquely her or horrifying because they don't get every penny. jo: the command do you

settle for pennies. >> ask wesley snipes he paid with his reputation and freedom and he is writing in the spanish prison right now may be not spanish but he was sentenced for federal tax evasion and he is not the only person. >> remember the irs is the only tax collectg agency in the entire world that says it can't force foreign banks to collect taxes for american citizens who live abroad. so this is the chaos they claim to want to prevent. americans to live anywhere else can get a bank account because the irs is forcing those banks to snoop and collect money. nobody does it anywhere the only other country that wants you to file the tax return is eritrea. high five for us.

john: we don't know wley snipes cataloger sentence because he was a celebrity. i don't know. >> that is my personal opinion but paying taxes is forced labor and dissolving the irs does not lead to anarchy it is an experiment we should try. john: i look forward to that. thank you. next, competition. celebrities say taxes should be higher but they are not volunteering to pay more.

john: there are some really rich people in america and we are deep in debt so why not just raise taxes on the rich people? some famous rich people say they don't need that tax cut >> eva long kor does not.

>> i know spend so much that i cannot afford to pay more in taxes. john: so they say so of the harm and other rich people more? let's ask our laugher who moved to tennessee just to avoid paying the california income tax? >> yes. it is phenomenal mostly income tax, no capital gains tax, and note its state tax it is phenomenal in tennessee and it is a great state. john: your affluent is just the estate tax how much money do you rich people need? >> i need a lot. idle mind paying more to be honest but i jst mind paying more as a percentage of my income to affect my decisions are like to make more and pay more with though low flat tax but that is not what they do they go

to the small base with a high rate that is the most damaging does not get the money. look at california they have the highest tax rates in the world slowing in growth dramatically, the revenues are not coming and the division of public service is the worst in the country. john: you can save themith your book your rica how to fix california but the way to fix it is to leave? >> if they don't fix i have to leave i was on governor schwarzenegger's of counsel of economic advisers he turned to the dark side reid tried some propositions but we lost the teachers association beat us to a pulp but then he became part of the problem and i said i am out. then moved to tennessee 2006 because of taxes and state economic policy. look what has happened since then. not that i make many forecast but at was a good

one. and states like tennessee that don't have the state income tax grow more. >> we have more revenue and much less unemployment. john: alaska florida and nevada south dakota and texas washington wyoming tennessee new hampshire all have no state x and growing better than the tax states? >> not all of them there are other policies that matter to of those states do have and an earned income tax and three of those are not right to work so there are other factors but yes, th are doing very well. >> and illinois and california is on the road to greece. >> that would be insulting to greece. >> phil mickelson made $60 million last year took a lot of grief when he said my tax rate is 60% i have to

make decisions. >> i don't know why he took a brief for that. it is a true statement. john: people say that you will save $8 million but you have millions how much do you want? to make youan give away to who you choose but to give it to the people in sacramento is a travesty like feeding rats in your basement. you shouldn't do it. you don't want these crtures to breed and multiplied. a a a problem like giving ney to tobacco companies. it is terrible. >> other celebrities were more open to moving like tiger woods moved from california to florida. >> i moved out of here in 1996 for that reason. >> liberals, you could lose me. it is outrageous what we are

paying. john: that is bill maher that usually loves big government. you would think it would start to sing again. >> i have been on his show a number of times i sent him a copy of my book and sai join me. we would love to have you in tennessee. [laughter] john: will smith says he supports higher taxes but when learned about france 75% tax rate. >> his reaction was telling. [speaking japanese] [speaking french] >> 75? that is different. 75? god bless america. john: we can laugh about the hypocrisy of celebrities but let's go back to the question of fairness. shared sacrifice.

and to say to me more than 1 million bucks to have to pay at least 30 percent of taxes which is the buffet rule. that is reasonable that those with more should pay more. >> we should progress you make 10 times as much i think it is right y would pay 10 times as much as i do. that seems obviously fair but when you look at warren buffett but he paid about 6100 of 1 percent of his income in taxes. that is not fair and does not include his not paying pital gains because aeons berkshire hathaway and the company buys the stocks not him personally and also an insurance company that has a huge tax advantage. warren buffett is the master and king of tax circumvention. to have him tell other people to pay more is truly an obnoxious and hypocritical. john: but because he pays so

little is seems reasonable he should say change the rules. >> it should. but he didn't. every time he talked about he never suggested taxing unrealized capital gains are once suggesd limiting deductions of kids to your family is with a 501(c)3 he never mentioned that. for obvious reasons that would have gotten him. it is hypocritical like how word from ohio the father of the at death tax six months before he died he moved to florida not to pay the ohio does tax. john kerry of massachusetts buying the ought to harbor is in rhode island itoes on and on. their behavior is not bad but the words, policies, recommendat ions and influence on others that is hypocritical and discusng. john: who would've thought actors and politicians would be hypocritical. [laughter] thank you. are laugher.

>> ganda koi is on the tax breaks when israel and

john: have you filed your

taxes? did you get your deductions? you probably missed a few is complicated. when those who have debts by taxes are those who employ a lobbyistor tax specialists i don't have a lobbyist but i do have bob to prepare my taxes. thank you. actually i would like to fire you but if i didn't i would miss my tax breaks. tome are incomprehensible and let's test that by playing a game we call real or fake. which israel and which is not? now to compete against steve doocy and gretchen carlson. >> thank you for playing real or fake is there a $10,000 tax deduction for whaling captains? >> that israel. what a way to start the show.

>> is there at five under dollar tax credit for painting your roof white? >> steve doocy has taken the lead run by the energy star program because whites reflects light. >> can you deduct up to $500 to make your just be more energy efficient? you got that right. number four, in one sta you can get a $3,000 tax deduction for an exceptional tree. in your yard. >>obody could make this up

>> the gentleman have that. >> is there a $500 tax credit for burdick -- putting a permit a bird sanctuary on your property? >> of course, . >> you got that wrong. >> there ought to be for th. >> number six what state offers a $50 tax credit for losing both arms? is that real or fake? >> $50? it is so outrageous. >> finally. yes. that is right. >> in oregon you must have suffered permit and a complete loss of functio but you can only get the $50 a year that you lose the limbs. john: it would cost $50 to fill out the forms. >> that is a horrible loss. >> at least they get something.

>> that is a slap in the face. >> would you like to disarm the allah? >> she will be here all week >> there is the tax credit for the deal. >> try the veal. >> what state gives the $50 tax credit for putting up a flagpole in front of your house. the gentleman have it. it is fake. >> is there a tax credit to hire kids and readily employable because they lack basic skills? absolutely real it is called the work opportunity tax credit is connected youth must be between 16 d 25 unemployed with no college and lack basic skills. >> i had a couple of those at my house. [laughter] >> one state lets you deduct

$200 to foster the classic american sport of hackensack john: this cannot be real. >> you are absolutely right. question number 10 in one state you live to be 100 years old you don't have to pay state income taxes. >> the state of alert scott? >> very good. brought to you by the smokers state steve doocy for the win. john: thank you. wouldn't that be nice if the taxes were simple so you could do that yourself and payless? i could fire bob. when we come back, a better way to tax.

john: have you read the wonderful book yet? it just cannot in paper book. know they can't response to the conceit that they can x everything they can do and should not try. government fails to individuals succeed. but individuals can succeed when devil is costly in-your-face taking your stuff and telling you you cannot do d it does more of that ast grows.

receivers it has grown bigger under every president of both parties and makes me wonder was there ever a president who did not gro government? there were a couple including this one. calvin coolidge is never on the best presidents west but he should be says amity shlaes the author. she wrote about college and he stopped growth. >> when he left office 1929 the federal government was smaller than when he came in 1923. john: but the know what also the political class, he is not liked. >> politicians of either party like to grow government and he shrinkage and i found it was fascinating how. he said no. all the time. whether the 50th and veto.

john: he said as much more important to kill bad bills band pass good one. >> you wrote that to his father who was a law maker. he said give the administration a chance to catch up with legislation don't write too many laws. these phrases sound so foign. he is a bit different and he believed an austerity that the economy would grow and his evidence shows he was corrt. john: he is blamed for the deession. >> it is weird history if you don't want to hurt roosevelt you ha to hurt the people who come before. >> but hoover came in between and increased spending. >> that's right. i blame hoover more but coolidge was the antitsis of roosevelt. theodore and franklin especially. if you like expanding government you will like to undermine coolidge. john: he took naps every

day. >> like ray again. >> people want activist politics? at the time he was popular. >> now we say governments create crisis and like to the college try to make a fun crisis that was part of the men said and people might notice that he developed the art of boring the country into blieving it did not need government which was the bt. john: they said the itch to run things did not afflict them. how refreshing. >> is intereing even the white house was modest. he did not wan to spend their city to get the tax cuts. he did not squander political capital so he would save every virtue prove that he could cut taxes. john: he cut tax rates down a 25% and more money came

in. >> he cut taxes lower than reagan down at 25 percent and reagan w 28%, while he had a balanced budget so that is interesting. on top of that he got more revee. this was supply-side experiment that worked. they did not use that phrase but said scientifi taxation but it was be coz as his treasury secretary said, if you charge less may be more trains will come. thprincipal from business. make it up on the volume and charge what the traffic will bear and the government did get extra money and in addition t rich paid more taxes with lower rates. john: when there was a disaster and the mississippi river flooded he did not rush there to say we will helpnd government solves this. >> it is difficult for the president to say no because they want to be loved and be

reelected but he thought at that moment people wanted a lot of disasters spending and infrastructure spending and history repeats itself and he knew he couldot veto that spending if he went to the disaster it would overwhelm him politically so he did not go history played a tragic trick then his own state was flooded and of course, you wanted to go we could not go to be fair and he did not go home to vermont. john: he did not intend to surrender to every emotional moment. that is all politicians do today. >> period he was extremely popular. voters liked cool coolidge a lot. john: if onlye could have more of that. silent cal was the president i wish our political class would, humble and sma government that allowed prosperity tope